During fetal life the lung develops as a liquid-filled structure with low blood flow compared with postnatal life. We studied the effects of liquid expansion of the fetal lung by measuring vascular conductance in perfused lungs in situ and arterial diameters in excised lungs of fetal lambs. Pulmonary vascular conductance invariably rose as the lung was deflated from its initial volume; maximal deflation to residual volume increased conductance 122%. With reexpansion, conductance fell progressively, culminating in cessation of flow at lung volumes of twice the initial volume. These changes persisted after vagotomy and thoracic sympathectomy and therefore were mechanical in character. Lung expansion from residual volume initially expanded 300- to 500-micron arteries but compressed arteries greater than 1,500 micron. Further expansion reduced the caliber of all arteries. Thus increasing lung liquid volume progressively constricts the pulmonary circulation in the fetus. Because the fetal pulmonary vascular resistance-lung volume relationship differs from that of the U-shaped form found in adult lungs, concepts based on the adult pulmonary circulation are not appropriate for liquid-filled fetal lungs.